Surety bonds play a very important role in construction and are often required in many situations. A surety bond is a guarantee that the job will be completed as per the terms of the contract. In a surety bond, there are three parties- the obligee (project owner), the principal (contractor) and the surety (who assures that the task will be completed per the terms of the agreement).
Surety bonds offer numerous advantages over traditional bank guarantees. Contractors, sub-contractors, roofers, electricians and other laborers can enjoy many unique benefits. These include-
- Surety bonds improve the reputation of the contractors as they’re considered capable of completing the project.
- For surety bonds, no tangible security is required. As a result, contractors are free to use their assets for business growth and procurement of additional working capital.
- A surety bond company can offer technical and financial assistance to the contractor. This significantly increases the chances of successful completion of the project.
- Also, instead of paying for the whole facility, contractors are required to pay only for the bond limits used.
For these reasons, it is important for every contractor to obtain a surety bond that meets its specific needs and requirements of each project they undertake.